Let's forget about the index charts today and focus on some particular stocks instead. Yes, I am talking about the market leaders whose charts I posted a little while earlier. Have a look if you haven't done so already or don't know what I am talking about.
Now, these are some of the stocks that have led this rally so far and they broke down in absolutely spectacular fashion today. I am not talking about a pullback here but an absolute slaughter. All these charts just go on to show the importance of sticking to your stop losses. Sometimes, one might feel that one is in a fundamentally very strong stock or the company has amazing growth potential, but these are no reasons for not keeping a stop loss. Sometimes, the market does not offer any second chances. But this is not the purpose of this post, so let's move on to the larger picture.
In spite of the collapse of these market leaders, the overall markets are holding up rather well. As it often happens with the markets, this rather admirable performance of the overall markets can be interpreted in two ways:
(a) This market is strong enough that it can withstand the breakdown of few of its leaders.
(b) This bull rally is on its last legs and the only thing holding up this rally now is suckers money coming in which always comes in at the top of the rallies.
Take your pick! My personal strategy here is to keep cash as my largest position. I am not going to even think about shorting this market until 1150 breaks on the S&P which should provide strong support to the bulls. Add the above two points, and I guess that makes me cautiously bullish until 1150 breaks.
Take care and good luck!